Matahari Rises to Record as Companies Vie for Controlling Stake

A cashier works at the check-out counter at PT Matahari Putra Prima's Hypermart in Jakarta. Photographer: Dimas Ardian/Bloomberg

Dec. 3 (Bloomberg) -- PT Matahari Putra Prima, Indonesia’s
biggest retailer by market value, rose to a record after saying
four companies, including South Korea’s Lotte Shopping Co., are
interested in acquiring a controlling stake.

Bank of America Corp.’s Merrill Lynch unit is
facilitating discussions with four retailers that may “explore
the modes of investment” that may include a stake sale,
Matahari said in an e-mailed statement. Its stock jumped 7
percent to 1,690 rupiah, the highest since listing in December
1992, at the 4 p.m. close of trading in Jakarta.

A purchase would give the buyer control over the biggest
rival to Carrefour SA in Southeast Asia’s largest economy, which
is forecast to expand at least 6 percent this year.
Matahari’s hypermarket business has annual sales of about
$1 billion that will probably grow 22 percent this year, the
statement said.

“More people tend to shop in convenient stores and the
majority of Indonesia’s population are in their productive age,
which is what attracts retailers,” said Betrand Raynaldi, an
analyst at PT eTrading Securities in Jakarta. Matahari’s
hypermarkets “own a large market share in Indonesia and their
stores are strategically located,” he said.

Wal-Mart, Casino

South Korea’s Lotte Shopping Co. is one of the four
retailers that may invest in Matahari, according to the
statement, which didn’t identify the other three suitors. Wal-Mart Stores Inc. and French retailer Casino Guichard- Perrachon
SA are among the companies that have looked at the assets,
people familiar with the deal said last month.

Today’s gain boosts Matahari’s climb in Jakarta trading
this year to 92 percent, giving it a market value of about $1
billion.

Matahari, which means “sun” in Indonesian, has 51
hypermarkets in Southeast Asia’s most populous nation, where
domestic consumption accounts for two-thirds of the economy.

Lotte Group, the parent of Lotte Shopping, has 21 outlets,
Tong Yang Securities Inc. said in a Nov. 4 report. Acquiring a
controlling stake or just the stores would let the South Korean
company overtake Carrefour SA as the largest hypermarket
operator in the Southeast Asian nation, the brokerage said.

Retail Network

Carrefour, the world’s second-biggest retailer, in June
opened its 64th hypermarket in Indonesia where it also has at
least 16 supermarkets, according to its website. The French
retailer, which entered Asia in 1989 with a hypermarket in
Taiwan, opened its first store in Jakarta in 1998.

Matahari, founded in 1958, also has 25 supermarkets, 53
drug stores, 90 family entertainment centers and 18 book shops
as well as a strategic alliance operating 92 department stores
in more than 50 cities across Indonesia, according to its
statement.

It plans to open at least 13 hypermarkets next year and 80
outlets over the next five years, Matahari said.

The possible investors “highlighted potential for
enhancing and expanding the food business with all non-related
assets and liabilities being excluded,” Matahari said.

Lotte’s Hwang Kag Gyu, executive vice president of
international and new business planning, said Nov. 30 it will
make a final offer for Matahari’s hypermarkets. The deadline for
final bids is likely to be delayed from an original schedule of
early December, he said. Lotte Shopping fell 0.4 percent to
477,000 won in Seoul trading.

Binding Offer

Carlyle Group and Hong Kong’s Dairy Farm International
Holdings Ltd. had also looked at the Indonesian retailer’s
assets, three people familiar with the process said last month.

Anthony Rose, Vice President, Corporate Affairs of Wal-Mart
Asia, said the company doesn’t comment on speculation. Dairy
Farm declined to comment in an e-mail.

Casino was considering a binding offer for the food-retailing business of Matahari, two people with knowledge of the
deal said last month. Casino last month agreed to buy
Carrefour’s business in Thailand for 868 million euros ($1.14
billion).

Karine Allouis, a spokeswoman for Casino, and Florence
Baranes-Cohen, a spokeswoman for Carrefour, couldn’t be reached
for comment yesterday.

Lotte Shopping, which said Nov. 12 it had submitted a
letter of intent to buy Matahari’s hypermarket business, has
spent about $1.5 billion on four acquisitions this year,
according to Bloomberg data.

Lotte Group seeks acquisitions in China and Southeast Asia
as sales overseas in the next decade are likely to expand two to
three times faster than in its domestic market, said Hwang, who
spends about a third of his time abroad.

Matahari said in October it hired Merrill Lynch to analyze
its business and follow up on interest by companies outside
Indonesia for an investment or partnership. The company sold
control of its department-store arm to a unit of CVC Capital
Partners Ltd. for 7.2 trillion rupiah ($798 million) in January.